Get Ready to Circle the Date for the Facebook IPO
Aug 30th 2011 12:47PM
Updated Aug 30th 2011 12:48PM
The Pew Research Center reported this week that more than half of Americans now use social networks. And I mean all citizens, not just the portion of those who participate online. (Roughly two-thirds of us who use online services participate in social networks.)
The finding helps to explain the astounding growth of Facebook and Zynga. Six years ago, only 5% of Americans said they used a social network of some kind. Today, more of us are using the likes of Facebook to find jobs, make friends, start relationships, partner with collaborators, and enjoy diversions.
Sound bad? Maybe it is, but the maxim that says social networks have made us shut-ins incapable of socializing with neighbors -- let alone co-workers -- is a myth. In June, Pew found that only 7% of the "friends" connected to the average Facebook user are strangers. Nearly 90% are people we've met at least twice. They're common citizens with whom we have real-life relationships.
As an investor, I find it fascinating that this groundswell has occurred even as some social networks have foundered. Friendster -- the original "next big thing" in social networking -- unfriended common users in May in an effort to reposition itself as a social gaming site. MySpace, which News Corp. (NAS: NWS) purchased in 2005 for $580 million, sold for $35 million in June to a group led by Justin Timberlake. And then there's Twitter, whose founders have mostly moved on to new things.
The implication? Facebook and LinkedIn (NYS: LNKD) , for all their faults, are special in the eyes of everyday users. They've become indispensable as others have become disposable. Google's (NAS: GOOG) new social network is showing signs of similar traction, but so did Twitter in its early days. Investors would do well to reserve judgment when it comes to Google+.
Yet Facebook is becoming more interesting by the day. Social media adoption makes social advertising more relevant, which in turn increases the social network's revenue and profit opportunity. It's a virtuous cycle that, judging by Pew's data, is here to stay.
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At the time this article was published Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team. He owned shares of Google at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Google+ or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool owns shares of Google. Motley Fool newsletter services have recommended buying shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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